House, Senate to drill into Obama budget - Lerner headed back to Oversight

DRIVING THE DAY — HOUSE, SENATE DRILL INTO OBAMA BUDGET. The Senate Finance Committee and the House Budget Committee will both hold hearings on the White House budget today featuring Obama administration chiefs. First up is the Senate Finance Committee — holding its first hearing under Chairman Ron Wyden — featuring Treasury Secretary Jack Lew. Members should be receptive at this hearing with Democrats likely to offer up praise for President Barack Obama’s proposal to expand tax credits for middle and lower-income taxpayers and increasing taxes for the country’s highest earners.

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But Sylvia M. Burwell, the director of the Office of Management and Budget, should not expect the same welcome when she appears before House Budget Committee at 2 p.m. Committee Chairman Paul Ryan has already called the budget a “disappointment” that “reinforces the status quo.”

“It would demand that families pay more so Washington can spend more. It would hollow out our defense capabilities. And it would do nothing to preserve or strengthen our entitlements. The President has just three years left in his administration, and yet he seems determined to do nothing about our fiscal challenges,” the Wisconsin Republican said in a statement.

SOME BUDGET PROPOSALS HAVE CHANCE TO ATTRACT BIPARTISANSHIP. Our Kelsey Snell reports, “Most of President Barack Obama’s budget is dead on arrival with congressional Republicans — but a handful of tax ideas can boast a bipartisan sheen. The tax strategy unveiled in the White House budget is a sharp contrast to the tax code overhaul released last week by House Ways and Means Committee Chairman Dave Camp (R-Mich.). Where the White House raises new funds to cover new education and innovation spending, for instance, Camp relies on tax cuts and funding shifts to spur economic growth. But Obama and Camp share a few targets. Common ground exists in a tax on big banks and lower corporate tax rates. Both plans call for the highest-earners to shoulder more of the tax burden, though for different reasons. The areas of overlap won’t add up to a glide path to tax reform, with a long-standing disagreement over whether the tax code should raise more revenue. But if there is any hope for agreement, these five areas give negotiators a place to begin.” http://politi.co/1i7QZML

DRIVING THE DAY II — ROUND TWO: LERNER V. ISSA. It’s a hearing nine months in the making. Today at 9:30 a.m. Lois Lerner, the former head of the IRS division that oversees nonprofits, will take the witness stand again — but don’t expect much. Lerner’s attorney William Taylor has been insistent that the former exempt division head will not testify or answer any questions about her involvement in the tea party targeting scandal. Barring a last-minute deal, Lerner is expected to take the Fifth again. But that won’t mean the hearing will be short. You can expect Republican Reps. Darrell Issa, Jim Jordan and Trey Gowdy to lambast Lerner for her failure to testify and there will be plenty debate over whether Lerner waived her Fifth Amendment right after she made a statement during the May 22 hearing before invoking her right not to self-incriminate.

And for all this public drama, the real meat is going on behind the scenes. Taylor and Issa are negotiating potentially for immunity and a private hearing for Lerner to give her testimony. Emails between Taylor and Issa and his staff show that the two parties were close to reaching a deal that would delay the hearing by a week. But that was before Issa went on the Sunday shows and announced that Lerner would in fact be testifying.

FIRST LOOK: OVERSIGHT REPORT ON LERNER. House Oversight Republicans are sitting on a report zeroing in on Lerner’s role in the IRS targeting scandal, which will likely be released today. It alleges that Lerner took a particular interest in the famous Citizens United case, worrying about how it would affect the political activities of tax-exempt organizations.

Lerner was “keenly aware of acute political pressure to crack down on conservative-leaning organization. Not only did she seek to convey her agreement w/ this sentimental publically, she went so far as to engage in a wholly inappropriate [actions] to circumvent federal prohibitions in order to publicize her effort to crack down on a particular tea party applicant,” the report, provided to POLITICO, reads. “She created unprecedented roadblocks for tea party organizations, worked surreptitiously to advance new Obama Administration regulations that curtail the activities of existing 501c4 organizations — all the while attempting to maintain an appearance that her efforts did not appear, in her own words, ‘per se political.’”

HAPPY WEDNESDAY! Who is going to the NPF dinner tonight? Morning Tax — and most of the tax team — will be there. Come by to say hello! If you want to talk taxes , send gossip, scoops or actual tax advice to lfrench@politico.com or @ LaurenNFrench on Twitter. As always, please follow @ POLITICOPro and @ Morning_Tax.

**Let’s talk data theft: Data theft happens in every corner of the United States economy. According to the GAO, the U.S. government was breached more than 22,000 times in 2013, an average 60 times per day. http://bit.ly/OgEyFL **

HOUSE: Meets at 10 a.m.

SENATE: Convenes at 10 a.m.

ON THE AGENDA: House Ways and Means Chairman Dave Camp will speak to reporters at the Christian Science Monitor Breakfast this a.m.

THIS MONTH: ‘WHAT WORKS’ FROM POLITICO MAGAZINE, a yearlong editorial series presented by JPMorgan Chase, focuses on how Los Angeles, long known as the city with no center, has reinvented its once-derelict downtown. Now that loft apartments and sidewalk cafes are pressing up against Skid Row, the city’s finally starting to pay serious attention to its huge population of chronically homeless people. http://politi.co/1kwuTIs

THE EMAIL WE DIDN’T OPEN: “Hipsters, taxes and H&R Block.”

A BUDGET RECAP. Hiding under a rock — or more likely caught up in Ukraine news — yesterday? Have no fear, Morning Tax has the most important provisions in Obama’s budget for you. (Did we miss something? Here is a link to the budget: http://politico.pro/1hJHynW — let us know!)

-- President Barack Obama on Tuesday proposed raising $651 billion over a decade from wealthier Americans, including a minimum tax named for billionaire investor Warren Buffett and for capping the value of deductions taken by wealthier Americans. In the past Obama has pitched a minimum 30 percent tax rate for households with earnings above $1 million a year.

--- The White House also seeks increased funds to help it administer the 2010 health care law. That includes $113 million for health credits for small businesses that pay at least half of premiums for single health insurance coverage for their employees. That program got $88 million in 2014, the White House said. There is also $60.1 million available for the premium tax credits included in the health care law, which are designed to help offset the cost of insurance for lower-and-middle-income taxpayers. The 2014 allocation for that program was $36.7 million.

-- The White House is asking for $12.47 billion to fund the IRS in the fiscal year 2015 budget released Tuesday, a decrease in its ask from last year, as the tax-collecting agency grapples with big new responsibilities including implementing Obamacare and the Foreign Account Tax Compliance Act. That allocation is a drop from the $12.86 billion the White House sought last year, but it would be a significant increase from the $11.3 billion approved by congressional appropriators in January.

-- There is also a proposed “financial crisis responsibility fee” on banks in that would $56 billion over a decade — a tax similar to the one proposed last week by House Ways and Means Chairman Dave Camp.

-- A new proposal would reclassify transactions of digital goods and services as so-called Subpart F income — so that taxes cannot be deferred indefinitely — estimated to raise about $12 billion.

-- “Obama proposed his biggest tax increases yet on multinational corporations—$276 billion that companies would have to pay over the next decade largely through changes designed to prevent companies from stashing profits overseas. Administration officials said the changes, part of Mr. Obama's fiscal 2015 budget released Tuesday, would be paired with a separate reduction in corporate tax rates that would be included in a broad tax overhaul that he hopes to move through Congress,” The Wall Street Journal’s John McKinnon reports. http://on.wsj.com/1dZqd6n

TAX CUTS MVP IN SCOTT’S STATE OF THE STATE: Florida Gov. Rick Scott used his State of the State address yesterday to encourage state lawmakers to move forward with $560 million in proposed tax cuts, including a $100 million cut to commercial rental taxes, a roll-back of $400 million in state vehicle-registration fees and a freeze on tuition rates. Scott also boasted that his budget proposal would strengthen the state’s economy and reduce the state debt by $170 million.

"Working together, we rejected the tax-borrow-and-spend strategy that was hurting our future. It wasn't easy getting Florida's fiscal house in order. And it wasn't fun, either,” Scott said. “In my three years as governor, I have yet to have anyone come into my office and lobby me to spend less taxpayer money."

But nationally some are cautioning that such steep tax cuts could negatively impact the state’s infrastructure programs, said Carl Davis, a senior policy analyst at the Institute on Taxation and Economic Policy, speaking broadly about state economies.

“Tax cuts sound nice in isolation, but they come at a high cost in terms of investing less in education, infrastructure, and other services,” he said. “Having a well-educated workforce and roads that aren’t congested or crumbling is a lot more important to a business’ bottom line than its state tax rate.”

QUICK LINKS:

-- Cities such as Detroit, Boston, Philadelphia and Washington are developing programs to offer tax benefits to long-time residents who are feeling pressure to move from gentrification. More: http://nyti.ms/1hHFRrI

-- Patrick Gleason of Americans for Tax Reform is out with a piece this morning examining the impacts in the states from Ways and Means Chairman Dave Camp’s tax reform proposal. More: http://onforb.es/MLXdHT

DID YOU KNOW? Before 1900, visitors to Stonehenge were given chisels to they could take home a piece of the ancient monument.

**From the National Retail Federation: Criminal hackers are relentlessly attacking American businesses. Even the U.S. government was breached more than 22,000 times in 2013 — that’s 60 times per day. NRF is committed to finding broad, long-term solutions and to working with all stakeholders to ensure the protection of consumers’ sensitive information. The first step is the adoption of PIN and Chip card technology. The United Kingdom saw incredible results with a 75% drop in credit card fraud after PIN and Chip implementation. America and its industries are leaders in technological innovation and it’s time we harness that power to protect consumers.

Authors:

About The Author

Lauren French covers Congress for POLITICO.She is also one of the authors of Huddle – a must-read morning tip sheet covering congressional news. Lauren is focused on House Democrats and conservative Republicans. She previously covered congressional tax policy and the IRS.Before joining POLITICO, she was an intern with Reuters covering national security and foreign policy and with McClatchy and The Houston Chronicle.She graduated from The George Washington University in 2012 with a major in journalism, but truly received her education as a two-term editor-in-chief for The GW Hatchet. She currently lives in D.C.French hails from both Illinois and Florida, where she enjoys paddle boarding and water sports. She is learning to cook and puts hot sauce on everything.